The stock market is recovering from its lows of several weeks ago. Declining gas prices, potential grain shipments from Ukraine, improving supply chain issues, and still-robust job growth in the U.S. have arguably instilled confidence in investors. However, the fear of recessions and the bear market have caused stock prices to drop, lowering valuations and simultaneously raising dividend yields. Therefore, we run a screen and identify 5 undervalued dividend growth stocks for investors. Below, we discuss Best Buy Co., Inc. (BBY), Franklin Resources, Inc. (BEN), Lincoln National Corporation (LNC), T. Rowe Price Group, Inc. (TROW), and Whirlpool Corporation (WHR) as long-term buys.
We screen for nine criteria in this analysis to narrow the list of dividend growth stocks. Our focus is the Dividend Radar dataset, which includes stocks raising their dividend for at least five years. Dividend Radar is updated weekly and contains approximately 743 stocks.
The nine criteria used in our analysis are:
- Payout Ratio is not more than 65% – We pick this target value as a measure of dividend safety.
- Dividend Growth Streak is at least ten years – Only Dividend Contenders and better are included in the analysis.
- Dividend Yield is at least 3% – Our minimum target.
- Adjusted P/E Ratio TTM is less than or equal to 18X – This value is below the S&P 500 Index average.
- YTD Returns are below (-20%) – We are searching through stocks in a bear market territory.
- Market Cap is at least $5 billion – We are looking at large-cap stocks.
- Meets the Chowder Rule – For stocks with a dividend yield of 3%, this value must be greater than 12%.
Additionally, we filter out distressed stocks by requiring a positive P/E Ratio.
The results are illustrated in the table below, sorted by ticker. We have five matches, which are: Best Buy, Franklin Resources, Lincoln National, T. Rowe Price, and Whirlpool. Two stocks are Dividend Aristocrats and Dividend Champions, while three stocks are Dividend Contenders…
Please read the complete article at my profile on Seeking Alpha for 5 Undervalued Dividend Growth Stocks.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.